ZAP, the country’s leading creator of loyalty programs for businesses, recently raised P27.5 million (US$550,000) from a new funding round backed by investors including Venture Capital Holdings and Kickstart Ventures, a wholly owned subsidiary of Globe Telecom.
This brings ZAP’s total funding to about P70 million (US$1,400,000), after it also bagged P42.3 million (US$850,000) in a previous round of funding, participated by Seawood Resources and Singapore VC Wakemaker Partners.
Kickstart Ventures President Minette Navarrete says of its support for ZAP, “Kickstart has a bias for innovative, high-impact solutions, and we certainly found those in ZAP. Retail loyalty programs have proven their value globally, both as a means to grow revenue and retain customers. While there are many solutions providers out there, we’ve not seen any who has the scale and breadth of ZAP. ZAP’s growth and value of transactions handled – over P2 billion and growing monthly — give us confidence that they create value for merchants and shoppers alike.”
According to ZAP Co-Founder and CEO Dustin Cheng, this new funding puts the company in a stronger position as it prepares to expand its network of partner merchants and enter the payments space through continued product and team development.
Pivot to merchant-branded model
ZAP provides a merchant-branded, customizable, loyalty program to over 800 businesses in the Philippines. It prides in having the simplest, quickest way for customers and businesses to be connected, as only a mobile number is needed for customers to sign up to any loyalty service. Customers get updated with their points balance through SMS, while merchants enjoy a range of services including consumer insights and targeted mobile messaging.
Total Philippines, Chatime, Vikings, Happy Lemon, Florabel Group, Frankie’s New York Buffalo Wings, and Kiehl’s are just some of ZAP’s over 800 partner merchants.
ZAP started operations in 2013 using the coalition model, or a shared points system across all its partner merchants. The set-up was initially promising, but merchants’ interest decreased overtime as they did not see the expected customer loyalty create an impact on their businesses.
“In the coalition or open loop model, customers can earn their points in one merchant, and redeem those points in another. Merchants had to pay ZAP for the points earned plus a service charge on top, even if there was no guarantee that these points would be redeemed in their store. Our merchants realized later on that this did not positively contribute to their business and actually defeats the core concept of loyalty, which is repeated transactions in the same store or business. It promoted loyalty to the coalition and not to the specific merchant,” Cheng explained.
Thus, ZAP pivoted to its current merchant-branded model to maximize the effectivity of its loyalty program. In this model, points gained in one merchant’s store may only be used in the same store or in the merchant’s other branches.
“We found that this is the model was a better fit for our merchants’ businesses. Merchants do not have to pay for points given out since it can only be redeemed in their store. This way, merchants can guarantee that the customers come back to them. In fact, we saw a 2000% rise in merchant usage of ZAP’s platform after we introduced the merchant-branded model,” Cheng added.
Entry into payments
With e-commerce enjoying a steady growth in usage in the Philippines, along with the entry of other tech and telco firms in this space, ZAP will also soon diversify and mark its own foray into payments.
Cheng shares that while various mobile payment providers are pushing the service for consumers, payments alone will not be able to drive consumer adoption. “Loyalty plus payments presents a stronger overall value proposition to both merchants and consumers, and that is what we, at ZAP, are looking to provide.”
Cheng adds that this year, ZAP will focus on expanding its client portfolio with more big-name brands while continuing to implement product and service improvements to help businesses in customer acquisition, retention, and management.